DoD wants EPFO to invest Rs 6,000 cr, fund commits Rs 1k cr

The Employees Provident Fund Organisation (EPFO) had earlier committed to the Finance Ministry that it will start investing from August 1 in the CPSE ETF, a top official said.

New Delhi: Facing an uphill target, the Department of Disinvestment (DoD) wants EPFO to invest Rs 6,000 crore in the country's only exchange traded fund of PSU stocks, but the retirement fund body is now keen on investing only Rs 1,000 crore.

The Employees Provident Fund Organisation (EPFO) had earlier committed to the Finance Ministry that it will start investing from August 1 in the CPSE ETF, a top official said.

The ETF is a pool of shares of 10 blue-chip state-run firms, including ONGC, GAIL, Coal India and IOC.
But the pension fund body has not yet reverted to the DoD on how much it will invest and when.
"EPFO is dilly dallying on its commitment to invest in CPSE ETF. They said they would invest from August 1, but have not yet come up with any proposal," the official told PTI.

The official further said that the EPFO is now insisting on a longer term track record of returns on CPSE ETF investments, which is not possible as the fund has started operation only in March last year.

When contacted EPFO's Central Provident Fund Commission K K Jalan told PTI that EPFO has decided to invest 5 per cent of the incremental deposits in ETFs every month but said no decision on how much to invest in the CPSE ETF have been made.

The government had first launched a CPSE ETF, comprising scrips of 10 PSUs, in March 2014 under which retail investors have to invest a minimum of Rs 5,000 to buy units.

The Finance Ministry is planning to launch a revamped and retail investor-friendly CPSE ETF soon.
The ETF forms part of government disinvestment programme of current fiscal through which DOD targets to raise Rs 41,000 crore by selling minority stake in PSUs.

"We asked EPFO to put Rs 6,000 crore. They saying it is too high. They say trade union representatives are not agreeing. They are okay with Rs 1,000 crore," the official added.

The EPFO, which has over six crore subscribers, has been investing in state and central government securities.

It had earlier decided to invest a portion of its incremental corpus in the CPSE ETF. EPFO has a corpus of about Rs 6.5 lakh crore with an average annual deposit of Rs 80,000 crore.

The official said when the disinvestment department goes for overseas roadshows, investors ask if domestic pension fund is investing in PSU stake sale. "EPFO investment in ETF would give a good signal to foreign pension funds."

The 10 PSUs, which are part of the fund basket are – Oil & Natural Gas Corp, GAIL India, Coal India, Indian Oil, Oil India, Power Finance Corp, Rural Electrification Corp, Container Corp, Engineers India and Bharat Electronics.

An ETF is a security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange.

The new investment pattern notified in April by the Labour Ministry states that EPFO will invest a minimum of 5 per cent and up to 15 per cent of incremental deposits in equity or equity-related schemes.

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